Online real estate marketplace Zillow made good on the rumors today, announcing the $3.5 billion all-stock purchase of its major rival, San Francisco-based Trulia.
The news was mostly sunshine and synergy in the corporate announcement and New York Times coverage. “We’ve been competitors and rivals for nine years, but I’ve always had respect for them,” Zillow CEO Spencer Rascoff said.
If you look at the way Rascoff greeted Trulia’s arrival in the public stock markets two years ago, that would be quite an understatement.
First, Zillow raised $147 million in a follow-on stock offering as Trulia was waiting on deck to tap into the public markets—a shrewd move that capitalized on some of the new demand Trulia was generating by marketing its own IPO.
A week later, Zillow (NASDAQ: [[ticker:Z]]) sued Trulia for allegedly violating Zillow’s patent on Web-based property value estimates. Although the lawsuit will obviously be canceled after a merger, the dispute is still dragging on, with Trulia detailing its challenge at the U.S. Patent and Trademark Office in its latest quarterly earnings report.
Today, however, the rivals are singing a different tune. “Our two companies share complementary employee cultures with innovative, consumer-first philosophies and a deep commitment to create the best products and services for our industry partners,” Trulia CEO Pete Flint said in the joint announcement.
In the end, this is simply a big play to knock out a competitor, which should allow Seattle-based Zillow to grab more consumer eyeballs and real estate agent marketing dollars. Only about half of Trulia’s 54 million monthly unique visitors also visit Zillow, which gives the combined company an instantly bigger footprint.
Zillow can use that larger base to draw more money from real estate agents, who are both companies’ primary source of revenue. Although the Zillow and Trulia CEOs said in their press release that they are “primarily media companies,” it’s more accurate to think of them as hybrids.
While their main assets are large amounts of consumer Web traffic, both companies really make money by charging real estate agents subscription fees for digital marketing tools to access that audience, including paid search listings and customer-tracking software.
If I were a real estate agent using online tools, I’d expect that my fees would probably climb as a result of this deal.
